Trade and Business Cycle Synchronization in OECD Countries: A Re-Examination
University of Groningen - Department of Economics
University of Groningen - Department of Economics (Economie)
Jakob De Haan
University of Groningen - Faculty of Economics and Business; De Nederlandsche Bank; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)
CESifo Working Paper Series No. 1546
This paper re-examines the relationship between trade intensity and business cycle synchronization for 21 OECD countries during 1970-2003. Instead of using instrumental variables, we estimate a multivariate model including variables capturing specialisation, financial integration, and similarity of economic policies. We confirm that trade intensity affects business cycle synchronization, but the effect is much smaller than previously reported. Other factors in our model have a similar impact on business cycle synchronization as trade intensity. Finally, we find that the effect of trade on business cycle synchronisation is not driven by outliers and does not suffer from parameter heterogeneity.
Number of Pages in PDF File: 43
Keywords: business cycles, trade, synchronization of business cycles
JEL Classification: E32, F42working papers series
Date posted: October 24, 2005
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